Harrisburg will have to wait at least one more day for a legislative fix that could allow the capital city to exit a state program for distressed municipalities but maintain its special taxing authority.
After clearing the state House on Monday, a bill to let Harrisburg out of Act 47 is expected to come before the Senate on Wednesday, Republican spokeswoman Jenn Kocher said Tuesday.
“It needs another day of consideration and has to run through the (Appropriations) Committee,” she said. “That is going to happen today, then it will be on final consideration for tomorrow.”
Wednesday also is the final fall legislative session day before the midterm election in November. If the bill, House Bill 2557, passes the Senate, it is unclear whether Gov. Tom Wolf will sign it. A spokesman for the governor was not immediately available for comment.
The House passed the bill by a 185-5 vote. The measure would allow Harrisburg to preserve higher earned-income and local services taxes in Harrisburg for five more years. The proposal, which was developed by Reps. Greg Rothman (R-Cumberland) and Patty Kim (D-Dauphin), also would prohibit a commuter tax, or earned-income tax on non-residents who work in the city.
The city’s 2 percent earned-income tax on residents and $156-per-year local services tax on people who work in the city provides about $12 million per year in revenue.
In addition to the five-year limit — a change from the original bill where officials were hoping to preserve the higher tax rates for at least 20 years — the amended version of H.B. 2557 would authorize the creation of an intergovernmental cooperation authority. The authority would be governed by a five-member board appointed by the governor, Senate president pro tempore, speaker of the House, Senate minority leader and House minority leader.
The authority would be tasked with developing a financial plan for the city. That plan would need to account for the elimination of the higher taxation after five years.
Beginning in 2024, Harrisburg would be required to lower its earned income tax rate back to 1 percent, while the local services tax would decline to $52 per year.
Lawmakers used Pittsburgh as an example of where an authority helped a city in its financial recovery and ultimate rise out of Act 47.
Rothman believes the legislation should promote continued stability and investments in Harrisburg by businesses and residents, allowing the city to grow its way out of past debt troubles.
“The city is the heart of this region,” he said. “A strong heart is critical to a strong regional body.”
Local real estate professionals also are optimistic that this bill would give Harrisburg enough time to build up its tax base to offset the future budget shortfall from the expiration of higher taxes.
“I guess time will tell,” said Edwin Tichenor, president of the Greater Harrisburg Association of Realtors. “The ball is in Harrisburg’s court to create a collaborative environment with the private sector to encourage and fan the flames of revitalization, fight blight and to create sustainable development.”
The five-year window also would give Harrisburg more time to complete a home rule charter, which could mean setting higher tax limits than what is allowed under state code.
Without the legislative fix, Harrisburg would remain in Act 47 and officials would need to adopt a three-year exit plan. But that exit plan would come with big property tax hikes that would be needed to cover the loss of the higher earned income and local services taxes under Act 47.